Two Essays on Product and Pricing Innovation

Abstract

My dissertation adopts analytical method to understand how firms innovate their marketing activities in response to the constantly changing business environment, and how such activities impact the behavior and wellbeing of consumers. In essay 1, I develop a profit-enhancing selling method, contingency selling, that is tailored to the unique features of sports events marketing, including capacity constraints, game uncertainty, and preference heterogeneity. I find that when the capacity constraint is tight, contingency selling outperforms other selling mechanisms such as traditional selling with or without a secondary market, spot selling, and ticket options. Essay 2 focuses on “all-or-nothing”, a unique feature of crowdfunding. I show that when the new product’s market potential is uncertain, the “all-or-nothing” feature provides double benefits to the entrepreneur. First, it safeguards the entrepreneur against the downside market uncertainty. Second, this safeguard enables the entrepreneur to take advantage of the upside uncertainty by producing products of higher quality, which are typically associated with higher risk. Jointly, these two effects lead to the counter-intuitive result that that crowdfunding allows the entrepreneur to benefit from high degree of uncertainty.